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[2008] ZAWCHC 47
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Law Society of South Africa and Others v Road Accident Fund and Another (12209/08) [2008] ZAWCHC 47; 2009 (1) SA 206 (C) (15 August 2008)
IN THE HIGH COURT OF
SOUTH AFRICA
(
CAPE OF GOOD HOPE
PROVINCIAL DIVISION)
CASE NO: 12209/08
In the matter between:
LAW SOCIETY OF
SOUTH AFRICA
1
st
Applicant
SOUTH AFRICAN ASSOCIATION OF PERSONAL
INJURY LAWYERS 2
nd
Applicant
LUVUYO NICOLAAS MBELE 3
rd
Applicant
and
THE ROAD ACCIDENT FUND 1
st
Respondent
THE MINISTER OF TRANSPORT 2
nd
Respondent
JUDGMENT :
15 AUGUST 2008
TRAVERSO, AJP :
[1]
This is an application
for an interim order pending the determination of a judicial review to
declare invalid and
set aside the decision of the f
irst respondent to implement a
system known as the “
Direct Payment System
”
(“
DPS
”)
.
[2]
The three applicants are The Law Society of South Africa, The South African Association of Personal Injury Lawyers and a certain
Mr. Mbele.
The respondents are the Road Accident Fund (“
RAF
”) and the Minister of Transport. No re
lief is being claimed against
of the
Minister of Transport
.
[3]
The background to this matter is briefly the following.
The
RAF administers the compensation scheme established in terms of the Road Accident Fund Act, No. 56 of 1996
(“
the RAF Act
”)
. It has become
practice for attorneys to undertake RAF work on a contingency basis. This is authorised by the
Contingency Fees Act,
No. 66 of 1997
and
given
recogni
tion in
Section 19(d) of the RAF Act. Typically, attorney
s
who undertake RAF work on
a contingency basis enter into
contract
s
with their client
s
in which the
ir
client
s
agree that when the
ir
claim
s
ha
ve been resolved, the RAF must
pay the
compensation into the attorney
s
’
trust account
s
,
who are entitled to
deduct from th
e award
the fees and disbursements due to him or her and the
n pay the
balance to the
ir
client.
[4]
When the RAF settles a claim
,
or is ordered to
effect
payment of a claim, it is liable for
payment of the part
y and party costs of the successful claimant
. Party and party costs typically represent 50% to 70% of the
total of the
fees and disburs
ements due to an attorney. A substantial portion
of the costs incurred in the running
of
a case form
s
part of the attorney and client
component of
costs, and are not recoverable from the RAF. The same applies to disbursements such as fees of experts, which are generally taxed
at a rate significa
ntly lower than the actual fees charged
. The consequence is that w
hen a claim is finalised and
compensation paid by the RAF into
an
attorney’s trust account, part
there
of is deducted by the attorney pursuant to his or her a
greement with his or her client, and the balance is paid to the client.
This system has
been employed for decades and
is the basis upo
n which attorneys undertake
work
of that nature
and
is the method by
which claimants obtain representation in order to ena
ble them to pursue their claims against the RAF.
[5]
On 30 October 2007
,
and unbeknown to the first applicant,
the RAF decided to in
troduce
a Direct Pay System. The method
ology
of the DPS is that while the RAF will pay the party and party costs and disbursements to the attorney
s
, the compensation its
elf will be paid directly to
claimant
s
. It is not disputed
that after the decision was made to
i
ntroduce
the DPS, dis
cussions
continued
between the RAF and the first and second applicants about the possible introduction
there
of
as if the negoti
ation process was still ongoing
, whereas unbeknown to the applicants a decision had already been
taken
to implement it at some future date.
[6]
On 21 July 2008 the RAF announced by way of a newspaper advertisement that it had decided to adopt
the
DPS
and that it would come
into operation 11 days later, namely on 11 August 2008. This advertisements states
inter alia
:
“After careful consideration of the submissions and as part of its commitment to improve service delivery and reduce fraud and
corruption, the RAF is introducing a system to pay the claimants directly
…
After processing your claim the RAF would send you or your representative (if applicable) an offer of settlement. Upon acceptance
of the settlement the RAF will pay your
compensation directly to you…
The RAF will pay reasonable and necessary fees directly to your attorney as per tariffs
(sic)
guideline set in the Rules of Court. Other expenses (eg medical and other expert
’
s
(sic)
costs) will also be paid directly to the attorney.”
[7]
It is this decision that
will form the subject matter of the review application. The gr
ounds of the review are numerous
. They include the following.
7.1
The decision of the RAF will, in effect, deprive claimants of access to legal representation.
It is alleged that t
his is so because
attorneys
will have difficulty in recovering the attorney and client fees and disbursements from their clients if the compensation is to b
e paid directly to them
.
7.2
It is contended that the DPS was implemented to eliminate the contingency fee arrangements
, which it is alleged,
will self-evidently reduce the participation of attorneys in the RAF system with all the
negative
consequences that will flow therefrom.
7.3
The decision is beyond the powers of the RAF because it does not have the power to institute
an administrative system which is contrary to its
statutory purpose and function, namely to pay
the
valid compensation claims of persons who have been injured in
road
accidents.
7.4
The decision is likely to discriminate unreasonably against poor people by depriving them of leg
al representation because it will
effective
ly
eliminat
e the contingency fee arrangements in RAF matters.
7.5
Further it was argued that the decision will unreasonably deprive attorneys from their property rights in existing claims.
[8
]
The first res
pondent on the other hand contended
that the application is brought
purely
with a view of protecting the commercial interests of the
applicants’
members rather than to protect the rights of claimants or to act in the public interest. The first respondent conten
ds that public interest demands
that the DPS be implemented
so as
to protect litigants against fraud and theft committed by attorneys.
[9]
There
undoubtedly
are legal practitioners who exploit the system of contingency fee arrangements
unreasonably
.
It is also beyond
doubt that there are legal practitioners who
commit theft and
fraud
at the expense of their clients
.
Such
conduct cannot be countenanced, and steps should be taken to
eradicate
such practitioners from the profession.
But such
conduct
is not the norm. Of all the many thousands of cases handled by the RAF
, it
managed to put together a sample of 50 cases
in which
complaints
were made that
theft
,
fraud
, or overreach
ing was
allegedly
committed
. Some
of th
o
se cases date back to 1995 – the most recent being in 1999.
To
therefore
suggest that
it has become necessary as a matter of urgency to take these far reaching steps to protect
poor litigants
against
theft, fraud
or overreaching by their attorneys,
appears to be
without a
sufficient
factual basis.
[1
0
]
Before dealing with the respective parties
’
arguments, I must point out that the first respondent appeared, from the outset, to acknowledge that the third applicant, Mr. Mbele,
has a legitimate right which the Court must protect on a basis of urgency.
The third applicant’s entire affidavit remains to all intents and purposes common cause inasmuch as it was not denied by the
first respondent.
His affidavit is
significant
as it is typical of the plight of many other indigent litigants:
“
1.
I am an adult unemployed male residing at 23161 Makhaya,
Dula Omar Street
, Khayelitsha. I am the Third Applicant herein. The contents hereof are within my personal knowledge and except where otherwise stated,
are true and correct.
2.
On 7 July 2006 I was a passenger in a Golden Arrow bus (‘the first bus”) which
was involved in a collision with another Golden Arrow bus (“the second bus”) as a result whereof I sustained severe injuries
and was rendered paraplegic.
3.
I consulted my current attorneys of record, A Batchelor and Associates, to advise me regarding
a claim for compensation for the injuries sustained by me against the Road Accident Fund. At the time of consulting my attorneys
I was financially destitute and as a result of my injuries have no prospect of earning an income.
4.
My attorneys advised me that they would act for me on the basis that they would hold over payment
of fees until the Road Accident Fund made payment to them of the proceeds of my claim and costs. They furthermore told me that they
would also cover all the disbursements necessary to prosecute my claim and that these costs (fees and disbursements) would be deducted
as a firs
t
charge from the proceeds of my claim. Without this arrangement I could not have pursued a claim.
5.
As a result of the severe injuries suffered by me I required ongoing and extensive medical
treatment both as an inpatient and as an outpatient. My attorneys gave an undertaking to
UCT Private
Academic
Hospital
to pay for my hospital expenses. Without this undertaking I would not have been transferred to a private hospital but would have
been treated at a
Provincial
Hospital
. My attorneys also paid various medical expenses including the costs of my obtaining a wheelchair.
6.
At a later stage my attorneys also contacted Dr Shrosbree
, who specialises in spinal cord
injuries at UCT Private Academic Hospital regarding my need for further treatment. With my attorney’s financial assistance
I was re-admitted to
UCT Private
Academic
Hospital
. My attorney gave a further undertaking so that I could obtain a more advanced wheelchair because I was getting bed sores from the
existing wheelchair.
7.
My attorney has made various undertakings on my behalf to pay for further hospital and medical expenses so I can continue to be treated
appropriately. Without the various loans from my attorney and undertakings to pay hospital and medical expenses, I would not have
been able to receive the treatment which I have received to date.
8.
To date my hospital and medical accounts amount to approximately R350 000,00, which my attorney has guaranteed to various service
providers will be paid out of the proceeds of my claim.
9.
My attorney lodged my claim on 25 October 2006. As at today’s date no offer has been forthcoming from the Road Accident Fund,
in respect of either merits or quantum. In March 2007 my attorneys proceeded to issue and serve summons on the Road Accident Fund
and a trial has now been allocated for the hearing of my case on 20 April 2009
, in the above Honourable Court.
…
11.
I
n January 2008 my attorney met with the Road Accident Fund when he was advised that the proverbial 1% would probably be conceded in
respect of the merits. On this basis, my attorney requested the Road Accident Fund to make an interim payment in respect of my past
hospital and medical treatment. Despite this, no formal concession has been made by the Road Accident Fund, nor have they agreed
to make an interim payment. On their own version, the Road Accident Fund is liable to pay me R25 000,00, arising from the negligence
of the driver of the second bus. They have not even offered this amount.
12.
My attorney has arranged for me to attend various medico-legal assessments for the purpose of obtaining medico-legal reports which
I am advised are necessary for the proper quantification of my claim. My attorney is responsible for the costs of these medico-legal
reports.
13.
My attorney has advised me that he is prepared to incur all the expenses necessary to prosecute my claim and give the undertakings
and expend the money he has done for my treatment on the understanding that he will be paid the proceeds of my claim by the Road
Accident Fund. To this end I have signed a power of attorney appointing my attorney as my agent to receive payment from the Road
Accident Fund on my behalf, so that my attorney can be reimbursed and also honour all the undertakings he has given for me. I understand
the necessity for this arrangement as without adequate security my attorney would not be able to represent me and his other clients
on the aforegoing basis.
14.
My attorney has told me that he cannot continue to represent me unless he has security for the payment of the expenses he has incurred
and will incur on my behalf. I want the RAF to agree to pay him in accordance with my instructions. I have been informed that it
will not do so.”
[11
]
It
appears to be
clear that the third applicant
wants the contingency agreement
between him and his attorney
to
be respected and given effect to
. He makes it clear that without this arrangement he would not have been
in a position to
pursue his claim
, and that if the DPS is implemented he
would have to forego the further services of his attorney
. The consequences of either of the t
wo scenarios will be devastating
.
[12]
Mr. Cassim
, for the first respondent, is correct in his submission
that the entire scheme of the Act is aimed at ensuring that claimants get
just
compensation and that only party and party costs are guaranteed under the
reunder
. But in all litigation there is
invariably
an attorney
and client component which has to
be borne by the client.
[13]
As can be seen from
Section 1
of the
Contingency Fees Act, No. 66 of 1997
, even where a contingency
fees agreement was not entered into,
fees on an
attorney and own client fees are regarded as
constituting
part of “
normal fees
”. The
mere fact that the RAF Act
makes provision for the payment of party and party costs
does not
disentitle an attorney from recovering the attorney and client component
of his fees
from his/her client.
To suggest that the accepted and normal practice of attorneys, to look to their clients for payment of the attorney and client costs
amounts
to theft, fraud
or overreaching, is unfounded.
[14]
The first respondent
’s attitude in this regard is without any foundation and displays a
lamentable
lack of appr
eciation of how the practice of law
functions.
I can find no factual basis for this generali
s
ation in the papers filed by the
first respondent. The alleged
theft
and fraud
is the only justification put forward by the first respondent for implementing the DPS on such short notice, and for its refusal
to
have
give
n
an undertaking for the
status quo
continu
ing to operate
until the finalisation of the
re
view application.
But as emphasised above, the first respondent does
not even attempt to mention a single
recent example which necessitated the sudden implementation of the DPS, or renders the need
that it be done
so pressing that the
status quo
cannot be maintained until a Court has had the opportunity to consider the review in a
n
orderly manner.
[15]
Have
the applicants established the requ
isites for an interim interdict?
As set out above, the first respondent accepts that the third applicant
has established a
prima facie
right. On that basis alone an interim order is justified
. But
it has, in my view, also been established
as regards
the first and second applicants
.
The applicants rely on a violation
of a number of constitutional rights. The difficulty of applying the ordinary civil standard of a
prima facie
right in constitutional matters has been the subject of some debate. After analysing
this debat
e Heher, J (as he then was) conc
lu
d
ed in
Ferreira v. Levin N.O. & Others
, 1995(2) SA 813 (W) at 836:
“I can see no reason why the ‘serious question to be tried’ approach should not be awarded equal status with the
traditional approach.”
In this matter the applicant has
,
at the very least
,
shown that there are serious constitutional questions to be tried
, such as,
inter alia,
the attorney’s right to property (Section 25) and the right to fair adm
inistrative action (Section 33) will be involved.
[16]
From the facts it
ha
s, in my view
,
been
clearly established that there is a well grounded apprehension of irre
parable harm. It
has not been placed in issue by the RAF in respect of the third applicant. If the DPS is implemented the third applicant’s
case may not be finally resolved before the trial of his matter which has been set down for 20 April 2009. In that event trial preparations
has to start some months before that date. The third applicant is a paraplegic an
d is unemployed. He desperately
needs the compensation
to
which
he is entitled
from the RAF. If an interim interdict is not granted, he will be put to Hobson’s choice. On the one
hand he
could
simply settle his claim unrepresented (assuming of course that the RAF will admit the merits of his claim, which it has still
not done). Alternatively he could
seek to have the trial postponed because he does not h
ave legal representation and re-
apply for a trial date w
hen the review application has been
determined. In that event he would
have to wait for at least another two years before he receives
c
ompensation
for
which he
has an immediate need
.
[17]
I
f the DPS is implemented forthwith attorneys will be deprived of
the
fees and disbursements to which they are entitled by virtue of valid agreements. The DPS will interfere with their entirely lawful
contractual arrangements with their clients. It will prevent them from effectively making binding agreements with their clients in
the future,
with a view to
safeguard
ing
their own i
nterests when they advance funds
to,
or undertake work on behalf of their clients.
[18]
What is more disconcerting is that the RAF has issued an internal instruction
on 4 August 2008 (after this application
had been
launched)
which reads as follows:
“In respect of defended matters with trial dates, we request that you try and obt
ain the banking details of the P
laintiff on the form which will follow, and forward same directly to the Fund. Once this has been done, we will be in a position to
make a tender in the matter. Should we not have the banking details of the
P
laintiff, we request that you proceed to trial in respect of these matters.”
If implemented t
his will result in trials running even where all the outstanding issues between the parties have been
or can be
settled, and
, in my view, is
tantamount to
an abuse both of Court
s
and of claimants.
[19]
The balance of convenience in my view clearly favours the applicants. The system of contingency fees and the payment of compensation
to the claimants’ attorneys have existed for decades. It is difficult to conceive of
any
material prejudice
that may result to
the RAF
’s
legitimate interests if th
e
system
of contingency fees would
continu
e
to operate for some months whilst the review application is determined. It
appears to me to be
clear that there
is
no need for the urgent implementation of the DPS. The RAF took the decision to adopt the DPS on 30 October 2007
, but
delayed for nine months before implementing it. This counters any suggestion that
there is an urgent need for its implementation
. In my view it is self-evident that the applicants do not have an alternative satisfactory remedy.
[20]
This brings me to the question of costs.
[21]
In normal
circumstances the costs of an application for interim relief would be reserved for the determination on the return day. The
circumstances of this case are not normal
. Firstly, the RAF is a public body dealing with public funds. It is mandated in terms of Section 195 of the Constitution to maintain
a high standard of professional ethics and to respond to people’s needs and to foster transparency by providing the public
with timely, accessible and accurate information.
The RAF
appears to have
withheld information from the members of the public
,
includ
ing
claimants
,
by
having
kep
t
its decision of 30 October 2007 secret.
I
t i
n fact it held out to the
first
and
second applicants
that no decision had been made. The inference is irresistible that
,
in
implementing the DPS in the manner that it
h
as
done
, it endeavoured
to thwart any attempt to have the lawfulness of the DPS
considered
by a Court before it
wa
s implemented.
[22]
It was not challenged by the first respondent that implementation of the DPS will be in violation of the agreements which were entered
into b
y
most attorneys and their clients in respect of RAF claims
,
and
the instructions
given by claimants to the RAF
pursuant to such agreement
s
. This nothwithstanding,
and despite the fact
that claimant
s
may have instructed
the RAF to make payment to t
he
i
r attorney
s
or anyone else, the RAF simply
refused to
do so and
insisted on paying the compensation
directly to
claimant
s
.
[23]
The introduction of the DPS will, by its very nature, deprive indigent and other litigants of access to justice. This is apparent
from the third applicant’s case which self-evidently will hold true for thousands of other indigent persons.
A Court
should not permit an organ of State to deprive litigants of access to justice.
[24]
Then there is the manner in which this application was brought. I have referred to the e-mail instructing the various attorneys to
simply run trials if the banking details of the claimants are not available at the time. During the course of argument when I put
the problem to Mr. Cassim, who appeared for the first respondent, that the implementation of the DPS
w
ould be in violation of the agreements entered into between most of the attorneys and their clients in respect of RAF claims as well
as the instructions which the claimants
have
g
i
ve
n
to the R
AF pursuant to the agreements, he informed me that the agreements will be honoured. When it was pointed out to him that that has not
been the stance of the respondents
, in the advertisement or
on the papers, he retorted “
but that is the
law
”. The debate continued. At one point
Mr. Cassim handed up a further e-mail, ostensibly emanating from the first respondent. It reads as follows:
“1.
Make all attempts to get the
P
laintiff’s attorney to agree that regarding paymen
t they will abide by the Court o
rder that will be handed down in the
CPD on 8 August 2008;
2.
If they will not agree
,
then the RAF
staff must try and contact the P
laintiff to establish if he/she wants the amount paid
into their account or the
attorneys
account. Once the
P
laintiff has made a considered decision, knowing their rights, then we will abide
by
what the
P
laintiff wants. If they want us to pay the
n
(sic)
directly, they must give us a letter to this effect;
3.
If you cannot get hold of the
P
laintiff and if the attorney has a valid Power of Attorney in which the
P
laintiff agrees that the compensation be paid to the attorney and we are satisfied that it is a valid POA, then we can agree to pay
the attorney.”
[25]
This has never been the attitude of th
e first respondent who was hell-
bent on paying
compensation
directly to
client
s
regardless of any agreement
s
or arrangement
s
that
are
in existence. The respondents were asked to give an undertaking pending the finalisation of the review application. This wa
s refused for no obvious reason a
nd despite this
their
affidavits were filed at
the last possi
ble moment. Furthermore t
he first respondent acted with a
continuing disregard for the a
ffect of the decision to implement the DPS on the operation of Courts by direct
ing that trials take place when a claimant did not have a bank account
or provide the RAF with its details
.
In other Divisions of the High Court, claimants
were driven
to seek the intervention of the Courts
in order
to force the first respondent to pay the
ir
compensation to the
ir
attorneys in terms of the existing agreements.
[26]
In all the circumstances I
held
the view that I should
articulate
the displeasure of the Court and
show
that Courts will not tolerate litigation to be conducted
in that manner
, and in the circumstances I ordered the first respondent to pay costs on an attorney and client scale.
[27]
This brings me to the application for intervention.
[28]
The application for intervention was completely misguided. In fact when Mr. Patel, for the intervening party commenced his argument,
he immediately conceded that his client could not intervene in the proceedings before me, but rather wish
ed
to in
tervene in the application for
review. He informed me that they had hoped that I would be prepared to make
such
an order. It is self-evident that I cannot ma
ke any order in
a matter which
will serve before another Court in the future.
[29]
I considered dismissing th
at
application with costs. But in view of Mr. Patel’s
ambivalent
attitude
, and in view of the fact that
the application
for intervention
was not
pursued with any rigour
before me by the intervening party
, I considered it in the interests of justice to make no order
therein
,
and leave it to the intervening party to appl
y for intervention to the review proceedings
.
_____________________
TRAVERSO, AJP
15 August 2008